Fed to hold special auctions 'as long as necessary'

Demand slightly weaker for second auction this week

WASHINGTON (MarketWatch) -- The Federal Reserve said Friday it would conduct biweekly auctions of short-term funds for "as long as necessary" to alleviate a credit squeeze.

Demand was slightly weaker for the Fed's second special auction this week of short-term credits, the Fed reported Friday. Read more.

The Fed auctioned $20 billion in 35-day credits at a stop-out interest rate of 4.67% in the auction held Thursday. A total of 73 banks submitted bids for $57.7 billion in the dutch-auction. The bid-to-cover ratio was 2.88.

On Monday, the Fed auctioned $20 billion at 4.65%, with 93 banks submitting bids for $61.6 billion. The European Central Bank, the Bank of England and the Swiss National Bank also conducted special auctions this week. See full story.

The Fed has joined with other central banks to provide extraordinary amounts of short-term funds to banks to alleviate a credit crunch.

The Fed said it would announce the size of the Jan. 14 and 28 auctions at noon on Jan. 4.

The dramatic actions have had little impact on market rates, however, which remain abnormally high.

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